Bash expand variable in a variable

Using eval should do it:

green="\033[0;32m"
colorstr="green"
eval echo -e "\$$colorstr" test           # -e = enable backslash escapes
test

The last test is in color green.

Bash supports associative arrays. Don't use indirection when you could use a dict. If you don't have associative arrays, upgrade to bash 4, ksh93, or zsh. Apparently mksh is adding them eventually as well, so there should be plenty of choice.

function colorSet {
    typeset -a \
        clrs=(black red green orange blue magenta cyan grey darkgrey ltred ltgreen yellow ltblue ltmagenta ltcyan white) \
        msc=(sgr0 bold dim smul blink rev invis)

    typeset x

    while ! ${2:+false}; do
        case ${1#--} in
            setaf|setab)
                for x in "${!clrs[@]}"; do
                    eval "$2"'[${clrs[x]}]=$(tput "${1#--}" "$x")'
                done
                ;;
            misc)
                for x in "${msc[@]}"; do
                    eval "$2"'[$x]=$(tput "$x")'
                done
                ;;
            *)
                return 1
        esac
        shift 2        
    done
}

function main {
    typeset -A fgColors bgColors miscEscapes
    if colorSet --setaf fgColors --setab bgColors --misc miscEscapes; then
        if [[ -n ${1:+${fgColors[$1]:+_}} ]]; then
            printf '%s%s%s\n' "${fgColors[${1}]}" "this text is ${1}" "${miscEscapes[sgr0]}"
        else
            printf '%s, %s\n' "${1:-Empty}" 'no such color.' >&2
            return 1
        fi
    else
        echo 'Failed setting color arrays.' >&2
        return 1
    fi
}

main "$@"

Though we're using eval, it's a different type of indirection for a different reason. Note how all the necessary guarantees are made for making this safe.

See also: http://mywiki.wooledge.org/BashFAQ/006

Your first result shows the problem:

$ echo $Green
\033[0;32m

The variable Green contains an string of a backlash, a zero, a 3, etc..

It was set by: Green="\033[0;32m". As such it is not a color code.
The text inside the variable needs to be interpreted (using echo -e, printf or $'...').

Let me explain with code:

$ Green="\033[0;32m"    ;     echo "  $Green   test   "
  \033[0;32m   test     

What you mean to do is:

$  Green="$(echo -e "\033[0;32m" )"    ;     echo "  $Green   test   "
 test   

In great color green. This could print the color but will not be useful for PS1:

$  Green="\033[0;32m"    ;     echo -e "  $Green   test   "
 test   

As it means that the string has to be interpreted by echo -e before it works.

An easier way (in bash) is :

$ Green=$'\033[0;32m'    ;     echo "  $Green   test   "
  test   

Please note the ` $'...' `

Having solved the issue of the variable Green, accesing it indirectly by the value of var colorstr is a second problem that could be solved by either:

$ eval echo \$$colorstr testing colors
testing colors
$ echo ${!colorstr} testing colors
testing colors

Note Please do not work with un-quoted values (as I did here because the values were under my control) in general. Learn to quote correctly, like:

$ eval echo \"\$$colorstr testing colors\"

And with that, you could write an PS1 equivalent to:

export PS1="${Green} welcome ${Red} user>"

with:

Green=$'\033[0;32m'    Red=$'\033[0;31m'
color1=Green           color2=Red
export PS1="${!color1} welcome ${!color2} user>"

You will want to write an alias to a function. Check out http://tldp.org/LDP/abs/html/functions.html, decent little tutorial and some examples.

EDIT: Sorry, looks like I misunderstood the issue. First it looks like your using the variables wrong, check out http://www.thegeekstuff.com/2010/07/bash-string-manipulation/. Also, what is invoking this script? Are you adding this to the .bash_profile or is this a script your users can launch? Using export should make the changes take effect right away without needed relog.

var Green="\[\e[32m\]"
var Red="\[\e41m\]"

export PS1="${Green} welcome ${Red} user>"